DOJ investigation prompts lawsuits alleging that airlines are fixing airfares It is alleged that Southwest, American, Delta, and United Airlines have been colluding to limit the increases in their capacity with the intent of increasing airfares. The airlines say the allegations are without merit. The airline industry is highly competitive with more people flying than ever before.

Explain how limiting the increase in capacity could lead to greater profit for the airlines, smaller consumer surplus, and deadweight loss. Illustrate your explanation with a graph.

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FIGURE 18.5 Chapter Checkpoint Assignable Problem 6 Price and cost (dollars per flight) 600+ 500 400 300 200 100 0 A C MR MC 2 3 5 6 Quantity (thousands of flights per week)